One recent wintry day at the Kluge Estate Winery and Vineyard tasting room in Charlottesville, customers were snapping up cases of red wine for bargain prices at what felt like a tag sale. Refrigerator cases that once held gourmet fare, such as pheasant-stuffed cabbage leaves, foie gras and chocolate tartlets, stood empty, and only a skeleton staff remained to pour tastings.

Outside, a retired insurance executive named Jerome Morris was picking over European oak wine barrels priced at $40 apiece. He said he was sorry the vineyard owned by socialite Patricia Kluge - once married to the country's richest man - was going out of business.

"Whatever she screwed up on, she didn't screw up on the quality of the wine, that's for sure," Morris said emphatically.

Up until late last year, Kluge had made a tasty sparkling wine and blended reds at her winery, nestled in the foothills of the Blue Ridge Mountains, up the road from Monticello. Kluge wines had been winning awards and acclaim for the Virginia wine industry and were served at four-star restaurants, as well as at the White House and Chelsea Clinton's wedding rehearsal dinner last summer.

"Everybody thought we were doing a grand job," says Kluge, sitting down for an interview in her attorney's office on Charlottesville's quaint Main Street. "I think if the economy had not come about the way it did and the bank had been more patient, then things would have been fine."

She has been the subject of endless fascination since she landed in Charlottesville in the 1980s as the British-raised and much younger wife of billionaire John Kluge. Over the years she had become known as a generous donor to local causes and a successful vintner, but in the past nine months, she has undergone a spectacular reversal of fortune, with credit problems forcing the sale of her jewelry and antiques and the banks seizing the vineyard and other property.

Just days ago, it seemed the low point had been reached.

On an unseasonably warm day in February, representatives from Kluge's bank gathered on the steps of the county courthouse to auction off her grand estate, Albemarle House. She and her ex-husband had spent four years during the '80s building the 23,000-square-foot home, modeled on an English country manor, outfitting it with eight bedrooms, a swimming pool, a private chapel, wine grotto and helicopter landing pad. Kluge called the place "my most perfect spot on Earth."

Now stripped of its contents, the mansion was set to go to the highest bidder, at a figure far below its initial listing of $100 million. A crowd of about 60 curious locals, media and others gathered to watch the fire sale.

Just before the auction began, however, one of the lawyers in attendance stepped forward and said: "We represent Donald Trump."

"My husband and I are thrilled," Kluge says of Trump, whom she enlisted when she hit the skids last year. "He's an old friend. We've known each other since our late 20s."

Even with Trump in the mix, though, Kluge's predicament is far from resolved. He may buy Albemarle House and ease Kluge's credit woes, but he claims he's not interested in making wine (although his representatives are still negotiating for the vineyard behind the scenes). And the vineyard is the one property Kluge would most like to save.

Signs of distress

Just a few years ago, Patricia Kluge was well on her way to creating her own little version of what she called "America's Eden" on her vast acreage of rolling green hills and trellised grape vines southeast of Charlottesville.

At that time the vineyard was producing 30,000 cases of quality wine a year, one of the largest in the state. Across the road she had begun building a subdivision of mini-estates that she hoped would attract wealthy "gentleman vintners" who could grow their own grapes.

She and her third husband, a former IBM executive named William Moses whom she married in 2000, were living happily in Albemarle House.

But the mini-empire that took more than a decade to build fell apart in less than a year, the victim of the tanking economy, an ill-timed expansion and other bad business decisions.

The first signs that all was not well at the Kluge family seat occurred last spring, when Kluge began selling off her jewelry. The 20-carat diamond and sapphire-and-diamond Cartier watch were the first to go. Then Sotheby's came in and sold the paintings, the Roman statues, the $3 million Chinese Qing dynasty clock, the four-poster bed from Hedingham Castle in England, the Chippendale commode, the Faberge silver and the George III crystal chandelier.

At the time Kluge breezily dismissed the sales as downsizing, but as the weeks wore on, it became apparent she was in serious financial trouble. She put her house on the market for $100 million, then slashed the price to $48 million, then $24 million. When the banks foreclosed on the vineyard in the fall and Albemarle House in January, the true depth of her losses emerged.

She owes her creditors a breathtaking $66 million.

Over the past nine months, Kluge's travails have been Topic A in Charlottesville, the university town about 21/2 hours southwest of Washington where Kluge has lived for more than 20 years. Locals - a blend of hippy artist types, students and landed Southern gentry - view Kluge and her high-flying lifestyle with a fascination that is at times tinged with envy, or disdain.

"They're watching this train wreck occur, and they're just amazed so much wealth could have been lost," said Hawes Spencer, the editor of the Hook, one of the two alternative weeklies in town.

Kluge had moved to Charlottesville with her then-husband, John Kluge, the billionaire founder of Metromedia, a chain of media properties later sold to Rupert Murdoch that became the foundation for the Fox network. Kluge had met the comely young divorcee - who had been raised in Baghdad and London - at a dinner party in New York and was instantly attracted to her. He wasn't bothered by the fact that she had once posed nude in the pages of a racy London magazine, called Knave, owned by her first husband.

Four decades later, Kluge just laughs when asked about her risque past.

Kluge has arrived for the interview toting a snakeskin bag with the enormous Sotheby's catalogue from her auction last summer, "The Collection of Patricia Kluge," which lands on the conference table with a loud thump.

She says she does not miss the expensive things that she and Kluge spent so much time buying to fill the 45 rooms of their neo-Georgian-style mansion, where they entertained heads of state and celebrities with lavish parties and English-style hunts.

"It wasn't [difficult] at all, isn't that funny? It really wasn't," she says. "No one can understand that when I say it. . . . I was very touched to see how many people cared about the collection to come and view it and buy it. We had thousands of people coming through the house, most of them curiosity-seekers of course. The serious buyers were on the phone."

She ended up with Albemarle House when she and Kluge split in 1990, as well as a cash settlement that was far less than the $1 billion sum that has long been reported. Kluge - who died last year at age 95 - moved to an estate next door, and they continued to co-parent their young son, John W. Kluge II.

It was when John II - now 27 and working at a think tank in New York - went off to prep school that Kluge began looking for her next role in life.

"Suddenly he didn't want to see me every weekend, so I realized I'd better get a life - and find something to do," she says.

Thomas Jefferson was the first big believer that Charlottesville's red clay soil and climate would be ideal for producing wines, although he failed at getting his grape vines to flourish. The area now has more than 20 wineries, including one next door run by the mother of singer Dave Matthews.

In 1999, Kluge decided to join their ranks. Thanks to her divorce settlement and some prudent investing, she had the cash. To make a small fortune in the wine business, the old saying goes, you have to start with a large one.

'No expense was spared'

From the start, Kluge dreamed big. She and Moses - who served as the vineyard's CEO - wanted to make the first Virginia wine that would compete on the world stage - and that, local vintners familiar with the story say, is what ultimately led to her downfall.

"We didn't want to have a little winery and sell it in the shop," she says. "I wanted to make a much more serious wine than tourist wine."

She spared no expense, investing at least $44 million, according to an estimate from one of her creditors, Farm Credit of the Virginias. They planted rows and rows of cabernet sauvignon, cabernet franc, merlot, malbec and chardonnay grapes - some 220 acres in all.

She hired famed wine blender Michel Rolland from Bordeaux, France, to mix her New World Red and a specialist from Champagne to make her sparkling wines. They bought pricey oak barrels and constructed the winery's offices from aged cedar (where, the other day, one perfect white swan swam placidly in a man-made pond). They bought an expensive bottling machine.

"No expense was spared; we put in the best of everything," Moses conceded. "We spent too much, too fast on the company. That was the big problem."

Locals are still talking about Kluge's limited-edition debut wine, which cost $495. It came in a specially made box of American walnut with ebony lipping and purple velvet lining - designed by Viscount Linley, the queen's nephew. Bill Clinton later bought some to give as thank-you gifts for bigwigs, Moses said.

"She had some hope, of course, of making money, but first of all she wanted to make the best possible product," said her friend and former consultant Gabriele Rausse, now the associate director of the gardens and grounds at Monticello.

It was a risky move, Rausse said, because even though her name was well known at that time - "the wine world didn't accept wines from Virginia."

Over the years Kluge earned a reputation as a difficult or mercurial employer, and she parted ways with some of the winemakers who came to advise her.

"She was a demanding person, but I don't mind that at all," Rausse said. "She wanted perfection, and perfection doesn't exist. But you can get close sometimes."

Others painted a picture of a complex woman who could be imperious but with a warm and genuine side - outfitting cribs for her field hands' babies or stepping in to run the tasting room when an employee's child was sick.

Ultimately, Kluge and her husband became major players in the growing Virginia wine industry, with Kluge traveling to expos in London to promote the brands and Moses serving on the state wine board. Kluge wines, with Patricia's cameo prominently on the label, began to achieve success - distributed across 20 states and getting good reviews. Champagne expert Richard Juhlin, for example, wrote that their sparkling wine for example, was "crisply elegant"; guests sipped the sparkling rose at Chelsea Clinton's prenuptial dinner last summer.

But the bank was not impressed. After a series of late payments and dismal sales - the vineyard had sold only 13,000 of its 30,000 cases of wine in its last years - they defaulted on a $35 million Farm Credit loan. When they were unable to find an investor to save the business, the bank seized the property last fall.

"They never made any of the sales projections," said Bill Shmidheiser, an attorney for Farm Credit. "They weren't bad people, they just weren't able to do it. To Patricia Kluge's credit, she literally put everything she owned - her jewelry, her personal art collection, everything - into the business. . . . They did a great job of establishing the vineyard and making the wine, they just weren't able to sell the wine."

Later, in separate actions, other banks moved to foreclose on Albemarle House and the housing development across the road, called Vineyard Estates, where Kluge had planned to build 24 luxury homes ranging from $6 million to $23 million - with amenities such as round-the-clock concierge service and horse trails. Local vintners say she badly underestimated the market just as the economy was collapsing.

"It wasn't just their winery that went under - it was their entire vision for this uber-world-class, super-rich playground down there," said Steve Mackey, the owner of Notaviva Vineyards in Loudoun County. "I just don't think that vision had as much potential as they thought it would."

Kluge defends the Vineyard Estates project, calling it "a very sound idea," which could be revived now that Trump has entered the picture.

But Trump said in a telephone interview that he has "absolutely no idea" what he would do with the properties should he acquire them. He already owns several luxury golf courses, including Trump National in Loudoun County, and Albemarle House once had a nine-hole golf course designed by Arnold Palmer on its grounds, which is now fallow.

"I like to buy things and figure it out later," Trump said. "At the moment I'm doing it out of respect for John [Kluge] and Pat. . . . It's a minor deal for me, not a big business interest."

These days Kluge and Moses have decamped behind the gates of the failed Vineyard Estates to a $3 million spec house that they built before the deal collapsed. It's 6,000 square feet; they've renamed it Glen Love Cottage.

Instead of tramping through the grape vines as they once did, they spend their days walking their dogs, Basil and Mr. Choo, on the subdivision's unfinished streets and huddling with lawyers, still trying to figure out a deal to find a partner for the vineyard, which will be sold at an absolute auction April 7.

"This is going to continue to be a shining light of the wine industry," Kluge says. "We're taking baby steps make sure that happens. We're not sure we'll succeed. We'll just see. "

'Sad to see'

On a day in December, a group of bidders from the local wine community gathered in a frigid warehouse in Madison, Va., where the bank was set to auction off some of the last Kluge wines. They were dwarfed by the immensity of the warehouse and shivered in the cold, recalled Robert Harllee, the owner of Market Street Wineshops in Charlottesville, who was there.

Harllee said it was "sad to see" the Kluge wines - which retailed for $15 to $30 a bottle - now being bid on at ridiculous prices, like $2 for an entire case.

A former associate of Kluge's who was also on hand said she was dismayed to see some of the bidders laughing, like it was all a big joke: "Look at what this has come down to." Had they forgotten all that Kluge had tried to do for the community over the years, the theater on Main Street she wrote a check to save, the after-school program for kids she'd bankrolled?

After a while the bank called a halt to the bidding because the prices had reached levels so low they were less than the state liquor tax.

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